Java Resort Group owned a very successful spa resort in Bali. The resort land and building were acquired at the beginning of 2022 at $1 million and $500,000, respectively. The company depreciated the building on a straight-line basis over 20 years with no expected residual value. Independent appraisals conducted at the end of each financial year estimate the market value of the resort land and building as follows:

	Land				Building
December 31, 2022	$	1,100,000			$	475,000
December 31, 2023	$	1,200,000			$	400,000
December 31, 2024	$	1,400,000			$	300,000

The company management believes that fair value is more relevant for decision making and where allowed by accounting standards, the company reports its assets at their fair value. Owing to a change in strategy, the company ceased its resort operations and rented out the resort facilities to another party on January 1, 2024. In return, the company received a fixed monthly rental income from its resort land and building.

Required:

1. Determine the carrying amount of the resort land and building on December 31, 2023 and 2024.

2. Provide the journal entries to record the change in use of the land and building on January 1, 2024.

Transcribed Image Text:

Required 1 Required 2 Determine the carrying amount of the resort land and building on December 31, 2023 and 2024. Land Building Cost 1/1/22 2012 depreciation Book value Revaluation gain (loss) Revalued amount 31/12/22 Revalued amount 1/1/23 2023 depreciation Book value Revaluation gain (loss) Revalued amount 31/12/23 Revalued amount 1/1/24 2024 depreciation Book value Revaluation gain (loss) Revalued amount 31/12/24 Required 1 Required 2 Determine the carrying amount of the resort land and building on December 31, 2023 and 2024. Land Building Cost 1/1/22 2012 depreciation Book value Revaluation gain (loss) Revalued amount 31/12/22 Revalued amount 1/1/23 2023 depreciation Book value Revaluation gain (loss) Revalued amount 31/12/23 Revalued amount 1/1/24 2024 depreciation Book value Revaluation gain (loss) Revalued amount 31/12/24

Answer rating: 100% (QA)

Note 1 Land cannot be depreciated Why because its value in future will always be increasing raises A... View the full answer